Petroleum and Natural Gas Regulatory Board (PNGRB) member S. Rath on Thursday said that the plans are afoot to connect the northeastern states with a gas pipeline.
“The project will be executed by a consortium of Indian Oil Corporation, Oil India Limited, Numaligarh Refinery Limited and GAIL. We are expecting that the project will e awarded in the next couple of months and become operational by 2023,” he said at the sixth road show for the 9th city gas distribution bidding round here.
Rath said that under the project, 1,500 km pipeline will be laid at a cost of Rs 6,000 crore.
He also said that Assam will be connected with Barauni in Bihar by 721-km gas pipeline by 2021.
“By Urja Ganga project, Guwahati will be connected to the national gas grid by a pipeline. The Haldia-Paradip-Barauni pipeline will connect Guwahati and is likely to be commissioned by 2021 at a cost of Rs 3,000 crore. The project will be executed by GAIL,” he added.
PNGRB Chairperson Dinesh K. Sarraf said that gas will be provided to Kamrup(metro) and Kamrup districts, besides Cachar, Karimganj and Hailakandi.
"The establishment of a national oil and gas pipeline company would be subject to the reform of (the) national petroleum and natural gas system, and the proper timing of unveiling the national oil and gas pipeline company is under discussion"
China is increasing investment in oil exploration to limit its dependence on imports, but forecasts say domestic production will keep declining as the country’s demand grows.
After years of warnings, it appears that China’s government is now taking the strategic implications of import dependence as a higher priority, spurred by rising reliance on foreign natural gas as well as oil.
On March 6, the South China Morning Post reported that China National Petroleum Corp. (CNPC) plans to boost its exploration budget fivefold this year to 5 billion yuan (U.S. $745 million), citing an interview with chairman Wang Yilin by the company’s online newsletter “China Petroleum Daily.”
The increase is aimed at reversing declines in domestic oil output, which has stagnated for over a decade due to diminished returns from aged oilfields and China’s difficult geology.
In 2018, production fell 1.4 percent to an average of 3.79 million barrels per day (mbpd), according to the National Bureau of Statistics (NBS). At the same time, China’s apparent oil demand rose 5.3 percent to 13.52 mbpd, Platts Commodity News said.
Using those figures, China’s import dependence for oil reached 72 percent, slightly more than CNPC’s calculations and those based on International Energy Agency (IEA) data.
Wang put the ratio at “almost 70 percent.”
Variations aside, China’s reliance on foreign oil has risen sharply since it first crossed the 50-percent threshold in 2008.
Yet, Wang’s remarks suggest that the national oil company (NOC) sees the deterioration of China’s energy security as a “political” issue driven by the government’s concerns.
“As energy is a lifeline of the economy, CNPC as a key state enterprise and the nation’s largest oil and gas supplier must carry out the political task of enhancing national energy security by having a sound resource development strategy,” Wang said.
While the rise of import dependence has been rapid, it shows few signs of changing course, according to projections.
In data released with its Oil 19 medium-term forecast on March 14, the Paris-based IEA estimated that imports will account for 72 percent of China’s oil demand this year, rising to 76 percent in 2024.
Domestic production will drop to 3.58 mbpd by that time, the IEA said. While demand is expected to grow by 10 percent during the period, production in China is slated to fall by more than five percent.
In a long-term forecast in November, the IEA projected the import proportion will hit 82 percent by 2040, even though demand growth is expected to slow.
No reason for optimism
Despite the increases in investment, there seems to be little confidence that more exploration spending will turn the situation around.
Edward Chow, senior associate for energy and national security at the Center for Strategic and International Studies in Washington, wondered whether the announced budget expansion would be devoted solely to domestic exploration or also to overseas resources.
“I don’t see any reason for optimism on large new domestic discoveries,” Chow said. “It isn’t like they hadn’t been looking before.”
Confidence may be lacking at the corporate level, as well.
Although the fivefold increase in the budget may make a numerical impression, the planned investment pales in comparison to the billions that CNPC promised to invest in foreign oil exploration and development in the 1990s under the government’s “go out” strategy.
In late 2017, CNPC argued that it would soon have rights to production of four mbpd overseas, or more than China’s output at home.
The suggestion was that import dependence was nothing to worry about, since nearly two-thirds of China’s demand would be covered by a combination of domestic production and foreign “equity oil.”
But from an energy security standpoint, the ownership of foreign oil may make only a marginal difference since it is still subject to cross-border risks and transit uncertainties on the high seas.
The government’s concern appears to have grown along with signs that import dependence for gas is quickly following the same pattern as authorities promote fuel-switching from coal to fight urban smog.
In his interview, Wang said that China’s reliance on foreign gas reached 45.3 percent last year. Based on RFA calculations from consumption figures, the import share stood at 39.2 percent in 2017.
Last year, domestic gas production rose 7.5 percent while consumption climbed 18.1 percent, the NBS and the National Development and Reform Commission (NDRC) said.
The IEA has said that dependence on foreign gas will reach 54 percent in 2040, but if the current pace persists, that level could come much sooner.
“What is clear is that China has been unsuccessful in arresting the trend of increasing oil import dependency, which has now extended to gas,” Chow said by email.
“Short of technological breakthroughs in producing domestic energy or reducing demand, this has clear energy security and foreign/defense policy implications,” he said.
‘A very unsafe source of risk’
Although the government is apparently pressing CNPC to do more, a commentary in the Communist Party-affiliated paper Global Times argued that the efforts are not enough.
Citing an interview with Lin Boqiang, dean of Xiamen University’s China Institute for Studies in Energy Policy, the paper said the estimate of 70-percent oil dependence may be “conservative.”
“More importantly, the government should be aware that such high oil dependency is actually a very unsafe source of risk,” the commentary said.
Lin held out little hope for gains in domestic oil production and instead urged increases in the amount of oil held in China’s strategic petroleum reserve (SPR).
The emergency stockpile is believed to hold only enough oil to cover 40 to 50 days’ worth of imports in case of disruptions, less than half of the coverage of SPRs in Japan and the United States, Lin said.
The timing of Wang’s interview on the sidelines of China’s annual legislative sessions is a sign that the exploration push is part of the government’s larger reform plan for the oil and gas sector.
It is unclear whether or how much the NOCs would be paid for their infrastructure assets, or whether they would be rewarded with shares in the new pipeline company.
But the proceeds from the pipeline spinoff could be used to fund exploration and development of more promising but challenging resources of shale oil and gas.
The South China Morning Post suggested that the restructuring could at least free up exploration funds.
“After the establishment of the new pipeline company and selling its pipelines to the firm, (CNPC subsidiary) PetroChina will no longer have to fund their expansion and have more capital to plow into resources exploration,” the paper said.
Xinhua cited remarks by CNPC’s Wang that suggested a more gradual approach.
“The establishment of a national oil and gas pipeline company would be subject to the reform of (the) national petroleum and natural gas system, and the proper timing of unveiling the national oil and gas pipeline company is under discussion,” Xinhua quoted him as saying. (RFA)